<PAGE> 1
THE GABELLI GROWTH FUND
THIRD QUARTER REPORT
SEPTEMBER 30, 1999
[FIVE STARS]
Morningstar Rated(TM) Gabelli Growth Fund 5
stars
overall and for the three-year period ended
9/30/99 among 3210
domestic equity funds, and for the five and
ten-year periods ended
9/30/99 among 2010 and 751 domestic equity
funds, respectively.
TO OUR SHAREHOLDERS,
It is beginning to look like investing in growth stocks means never having
to say you are sorry. This is especially true for investors in those companies
that play vital roles in the new information age economy. Those with the
foresight and stomach to buy and hold some of these rocket ships over the past
few years have seen their investments grow several fold. The list of winners
reads like a "Who's Who of The Information Highway". There's Cisco Systems,
whose routers direct traffic over the Internet. There's Sun Microsystems, whose
client server computers have become the hardware of choice for Internet Service
Providers ("ISPs"). There's EMC, the leader in data storage products, the demand
for which is growing with nearly every click of a mouse. Other capital builders
include Texas Instruments, the leading producer of Digital Signal Processors
("DSPs"), which are increasingly in demand for use in a broad range of
communication devices. Widely recognized brands such as Dell, IBM, Microsoft,
Intel, Lucent and others have delivered in big ways also. These stocks have
become like celebrities. They have thousands and even millions of fans
(especially among shareholders). As an owner of these stocks it is hard to
appreciate how tough it has been to make money in other sectors of the market
this year. We do not know if we are smart or just lucky. Maybe there is an angel
at work.
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PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Morningstar proprietary
ratings reflect historical risk adjusted performance as of September 30, 1999
and are subject to change every month. Morningstar ratings are calculated from a
Fund's three, five and ten-year average annual returns in excess of 90-day
T-Bill returns with appropriate fee adjustments and a risk factor that reflects
fund performance below 90-day T-Bill returns. The top 10% of the funds in a
broad asset class receive five stars, the next 22.5% receive four stars, the
next 35% receive three stars, the next 22.5% receive two stars and the bottom
10% receive one star.
[HOWARD WARD PHOTO]
HOWARD WARD
<PAGE> 2
INVESTMENT RESULTS (a)
<TABLE>
<CAPTION>
Quarter
------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1999: Net Asset Value................ $38.53 $41.38 $41.07 -- --
Total Return................... 8.8% 7.4% (0.8)% -- --
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1998: Net Asset Value................ $32.32 $33.37 $28.54 $35.40 $35.40
Total Return................... 12.9% 3.2% (14.5)% 30.2% 29.8%
- -------------------------------------------------------------------------------------------------------
1997: Net Asset Value................ $24.50 $29.25 $33.41 $28.63 $28.63
Total Return................... 1.5% 19.4% 14.2% 3.1% 42.6%
- -------------------------------------------------------------------------------------------------------
1996: Net Asset Value................ $23.75 $24.34 $25.35 $24.14 $24.14
Total Return................... 7.2% 2.5% 4.1% 4.4% 19.4%
- -------------------------------------------------------------------------------------------------------
1995: Net Asset Value................ $20.86 $22.99 $24.91 $22.16 $22.16
Total Return................... 6.0% 10.2% 8.4% 4.9% 32.7%
- -------------------------------------------------------------------------------------------------------
1994: Net Asset Value................ $21.90 $21.23 $22.58 $19.68 $19.68
Total Return................... (5.8)% (3.1)% 6.4% (0.5)% (3.4)%
- -------------------------------------------------------------------------------------------------------
1993: Net Asset Value................ $21.71 $21.84 $23.43 $23.26 $23.26
Total Return................... 0.6% 0.6% 7.3% 2.5% 11.3%
- -------------------------------------------------------------------------------------------------------
1992: Net Asset Value................ $20.27 $19.72 $20.50 $21.59 $21.59
Total Return................... (4.7)% (2.7)% 4.0% 8.5% 4.5%
- -------------------------------------------------------------------------------------------------------
1991: Net Asset Value................ $18.18 $18.02 $19.51 $21.28 $21.28
Total Return................... 11.7% (0.9)% 8.3% 12.0% 34.3%
- -------------------------------------------------------------------------------------------------------
1990: Net Asset Value................ $16.74 $17.80 $15.75 $16.27 $16.27
Total Return................... (1.9)% 6.3% (11.5)% 6.2% (2.0)%
- -------------------------------------------------------------------------------------------------------
1989: Net Asset Value................ $13.99 $15.73 $17.46 $17.07 $17.07
Total Return................... 10.6% 12.4% 11.0% 1.5% 40.1%
- -------------------------------------------------------------------------------------------------------
1988: Net Asset Value................ $10.87 $12.40 $12.71 $12.65 $12.65
Total Return................... 16.1% 14.1% 2.5% 2.5% 39.2%
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1987: Net Asset Value................ -- $10.84 $11.28 $9.51 $9.51
Total Return................... -- 8.4%(b) 4.1% (15.7)% (49)%(b)
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Average Annual Returns - September 30, 1999 (a)
---------------------------------------------------------
<S> <C>
1 Year....................................................................51.05%
5 Year....................................................................27.64%
10 Year...................................................................17.71%
Life of Fund (b)..........................................................19.59%
</TABLE>
<TABLE>
<CAPTION>
Dividend History
------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
----------------- -------------- ------------------
<S> <C> <C>
December 28, 1998 $1.745 $35.15
December 30, 1997 $5.790 $28.58
December 31, 1996 $2.324 $24.14
December 29, 1995 $3.960 $22.16
December 30, 1994 $2.790 $19.68
December 31, 1993 $0.760 $23.26
December 31, 1992 $0.646 $21.59
December 31, 1991 $0.573 $21.28
December 31, 1990 $0.460 $16.27
December 29, 1989 $0.654 $17.07
December 30, 1988 $0.377 $12.65
January 4, 1988 $0.152 $9.58
</TABLE>
(a) Total returns and average annual returns reflect changes in share price
and reinvestment of dividends and are net of expenses. The net asset value of
the Fund is reduced on the ex-dividend (payment) date by the amount of the
dividend paid. Of course, returns represent past performance and do not
guarantee future results. Investment returns and the principal value of an
investment will fluctuate. When shares are redeemed they may be worth more or
less than their original cost. (b) From commencement of investment operations
on April 10, 1987.
2
<PAGE> 3
Incidentally, the days when growth stock investors could ignore technology
stocks are over. We are struck by how the tables have turned. At the beginning
of the decade, no one questioned the wisdom of holding Coca-Cola and Gillette
while many growth managers shied away from technology stocks. Now, no one
questions the wisdom of owning technology stocks while many question the merits
of Coca-Cola and Gillette. Within technology, it would have been hard to outdo
the performance of Microsoft over the past decade, a time when its earnings grew
by 28 fold and its stock rose from $1 per share to a recent high of $100 per
share. With its $475 billion market capitalization, it is larger than any
company in the world by this measure, with a value more than $100 billion
greater than the previous titleholder, General Electric. Microsoft, known as
"Mister Softee" on trading desks, has made Bill Gates, its co-founder and CEO,
the wealthiest man on the planet. Things have worked out pretty well for this
college dropout. Microsoft is one of the greatest success stories in business
and stock market history. However, in this portfolio manager's opinion, its best
days as a stock are now over. Get ready for the "World Wide Web Wars".
INVESTMENT PERFORMANCE
For the third quarter ended September 30, 1999, The Gabelli Growth Fund's
(the "Fund") net asset value declined 0.75%. The Standard & Poor's ("S&P") 500
Index and Lipper Large-Cap Growth Fund Average declined 6.24% and 3.64%,
respectively, over the same period. The S&P 500 Index is an unmanaged indicator
of stock market performance, while the Lipper Average reflects the average
performance of mutual funds classified in this particular category. The Fund was
up 51.05% over the trailing twelve-month period. The S&P 500 Index and Lipper
Large-Cap Growth Fund Average rose 27.79% and 37.86%, respectively, over the
same twelve-month period.
For the ten-year period ended September 30, 1999, the Fund's total return
averaged 17.71% annually versus average annual total returns of 16.80% and
16.77% for the S&P 500 and Lipper Large-Cap Growth Fund Average, respectively.
Since inception on April 10, 1987 through September 30,1999, the Fund had a
cumulative total return of 833.09%, which equates to an average annual total
return of 19.59%. Our direct shareholders total 67,521 and net assets are $2.3
billion as of September 30,1999.
ECONOMIC BACKGROUND
The economy continues to sing, making Federal Reserve watchers fidgety.
Third quarter "real" Gross Domestic Product ("GDP") growth is likely to come in
about 3.0%, stronger than the second quarter but slower than the first quarter.
It is hard to detect much weakness from the look and feel of the economy and
labor markets. Sure, the backup in mortgage rates to above 8% has slowed the
housing market. Further, the unexpected success of OPEC in jacking the price of
oil to $25 per barrel strips the consumer of some purchasing power. But a
slowdown with some bite, the kind the financial markets crave, has proved
elusive. The financial market police see continued strength in the labor markets
and expect more pressure on wage costs, the kind that makes Alan Greenspan's
back ache.
It may be premature to panic. The Producer Price Index ("PPI") and Consumer
Price Index ("CPI") have continued to behave surprisingly well. On the other
hand, it sure seems like real estate prices have received a boost and some
commodity prices make us a bit uncomfortable. OPEC may have engineered the spike
in oil prices but oil demand has been strong. The price of gold erupted like Mt.
St. Helen's at the
3
<PAGE> 4
quarter's end after 15 European Central Banks agreed to limit their gold bullion
sales over the next five years. The gold market rumble was a bit artificial as
well. The Central Bank news hit the numerous short-sellers like a bolt of
lightening and the scramble to cover the massive short interest pushed the price
of an ounce of bullion from $255 to $310 in a few days. We do not think a
sustained rise in the price of gold is likely anytime soon. Nevertheless, we do
not like the recent direction of the price of oil and gold, regardless of the
rationale.
Despite the strength in the labor markets and the jump in oil, gold and
some real estate prices, we do expect the economy to moderate as the year,
decade, century and millennium wind down. More companies seem to be struggling
with profits and "Y2K" is a depressant on overall spending as it puts a premium
on liquidity just in case it is needed. We might speculate that come December,
the biggest concern is profits and not an overheating economy. Companies have
virtually no pricing power but their labor and raw material costs have moved up,
pinching margins. If you are a retailer, you face the reality that the Internet
is now in your face. The U. S. has had excess retailing capacity for years,
making it hard for the retailing industry, in the aggregate, to post real
growth. With the rise of online retailing, the increase in retailing "square
footage" is potentially infinite. The economy may continue to look good overall
but it is starting to feel bad in some areas.
THE STOCK MARKET
The stock market had a lot to digest in the third quarter and it was not
all pretty. In addition to the usual fears about earnings, inflation, interest
rates, oil and gold, we had to combat earthquakes, hurricanes and mosquitoes. If
we had lost the Ryder Cup there is no telling what might have happened to the
market. This says nothing of the constant noise pollution coming from market
pundits, especially technicians. I sure as heck hope I do not sound like they
do. If you ever catch me on television talking about stock chart patterns and
current account deficits, then you might want to consider some other fund
offerings. Stock charts are to traders what nautical charts are to sailors,
except they only show where you have been, not where you are going. The U.S. is
now a "trading nation" according to Fortune magazine, with a growing casino
mentality among an expanding base of "momentum" investors.
The market for initial public offerings ("IPOs") has been dominated by
Internet and technology deals. On the Internet side, we saw Dr. Koop.com go
public in the first quarter. It was priced at $9, traded up to $45 and is now at
$13. More impressive this past quarter was Red Hat, the largest distributor of
Linux software. Linux software is available free over the Web or you can pay Red
Hat $39 for a shrink wrap version. Red Hat's IPO was priced at $14, rose to $135
and is now about $88. At $88 per share, the company has a market capitalization
of roughly $5.9 billion, or 492 times their revenue of $12 million for the 12
months ended last May. Before year's end we expect to see successful IPOs for
Martha Stewart and The World Wrestling Federation. Lest you think the deal
quality is waning, fear not, The New York Stock Exchange wants to go public
early next year. Can you blame them?
This is all by way of saying that the stock market can still be a risky
place to navigate. We have enjoyed a market that in some cases has been overly
generous with the valuations accorded certain companies. From April through
mid-September, America Online's stock declined in value by about $90 billion, an
amount that is more than double the value of General Motors. Priceline.com lost
roughly
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<PAGE> 5
$15 billion of value, equal in value to McGraw-Hill and Dow Jones combined. Even
by today's Silicon Valley standards, that is real money. To be fair, the
Internet sector does not have a monopoly on overpriced stocks. Unrealistic
expectations have recently damaged the stocks of Coca-Cola and Gillette, Warren
Buffett's "two inevitables" and two of the bluest Blue Chips around. Coca-Cola's
stock has given back over $60 billion from its peak while Gillette has fallen by
more than $30 billion. Fundamentals change and stocks can get overpriced. That
is why we do research. Do not let anyone tell you that valuations do not matter.
PORTFOLIO HIGHLIGHTS
It was tough to make money in the third quarter, especially if you do not
invest in technology. As leading technology stocks rose, most financial services
and health care stocks fell. Of our top ten gainers for the quarter, six were
technology stocks (Sun Microsystems +35%, EMC +30%, Intel +25%, Texas
Instruments +14%, Qualcomm +14% since purchased, and Dell Computer +13%). Two
were media stocks (Tribune +14% and Clear Channel +16%), one was a drug stock
(Amgen +34%) and there was one retailer (Tiffany +24%). Rising interest rates
were primarily responsible for the weakness in financial services stocks. We do
not believe interest rates are in a secular upswing. Rather, we view the uptick
in rates as a cyclical response to a growing economy. As stated previously, we
expect economic growth to moderate over the balance of the year. Incidentally,
we were pleased to hear plans from the Treasury Department to commence a debt
buyback program with the budget surplus. It has been over 100 years since the
last Treasury debt buyback. The environment for financial stocks should improve
as the year progresses.
In an attempt to keep our technology weighting from getting too large, we
modestly trimmed some of our big technology winners such as IBM, Texas
Instruments, Cisco Systems and Sun Microsystems. As we have said before, we try
to keep our industry sector weights at a maximum level of 25%. Proceeds from the
sales went largely into the more depressed pharmaceutical stocks such as
Warner-Lambert, Eli Lilly and Merck, as well as financial services issues such
as Mellon Bank and State Street. We are hopeful that a slowing economy will
reward holders of high quality drug and financial issues. Additionally, we
expect a resumption of merger activity in the financial sector as the "Y2K"
season passes. Recently, we have seen a bidding war erupt for National
Westminster Bank and Chase Manhattan announced the acquisition of Hambrecht &
Quist. Additionally, Wells Fargo agreed to buy brokerage Ragen MacKenzie Group.
LOOKING AHEAD
Last quarter we expressed our opinion that the Internet mania peaked in
April. We still believe that. I am not aware of any Internet stock that is
higher today than in April. We also said that the market "would not easily
adjust to another leg up in interest rates" and that proved accurate. We further
asked you to be prepared for something less than the "best of all possible
worlds." As of now, it is still too early to relax.
We do not know how long America's love affair with large company growth
stocks will last. The past five years were oh so rewarding, but are 20% to 30%
annual returns really sustainable? At some point, stocks that do not fit neatly
in the large cap growth box may generate the largest stock market gains.
5
<PAGE> 6
Investors in value, foreign or small companies may be feeling pretty smart
twelve months hence. Stock market history suggests there is a cyclicality to
returns by investment style which seems undeniable. That said, however, if the
economic background for stocks remains mostly positive and the earnings of many
of these companies continue to compound at 20% to 30% rates, then investors in
these stocks are likely to reap additional rewards.
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Fund.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time.
Cisco Systems Inc. (CSCO - $68.5625 - Nasdaq) is the leading supplier of data
networking equipment such as routers and ATM switches for use in Local Area
Networks, Wide Area Networks and The Internet. As an integral provider of
infrastructure for the Internet, the company is a major beneficiary of the
"Net's" explosive growth. We expect significant growth in earnings to continue
over the next few years.
Clear Channel Communications Inc. (CCU - $79.875 - NYSE) is one of the top two
radio broadcasters, along with Infinity Broadcasting (which is 80% owned by
CBS). The company is also a leader in outdoor advertising. Both markets are
strong, reflecting the expanding national economy and heavy advertising by new
Internet companies as they strive to develop brand awareness. Radio ad rates are
low compared to other media such as television and newspapers, which gives radio
operators a degree of pricing protection. As of this writing, CCU has announced
plans to purchase AMFM (formerly Chancellor Broadcasting), which will further
set Clear Channel and Infinity apart as the heavyweights in the radio business.
EMC Corp. (EMC - $71.4375 - NYSE) is the leading provider of enterprise wide
data storage products. Storage has become a high growth market in today's
information based economy. Electronic commerce requires massive amounts of
storage, which has given EMC a tremendous business opportunity. We believe EMC
is the technology leader in enterprise storage (competitors are IBM, Hitachi and
Sun Microsystems) and is leading the field in introducing Storage Area Networks
("SANs"). EMC is the vendor of choice for Internet Service Providers, just as
Cisco is for routers and Sun is for client servers. We expect strong double
digit growth in the foreseeable future.
Home Depot Inc. (HD - $68.625 - NYSE) continues to take market share in the home
improvement retailing segment, in which it is the leader by a wide margin. HD
does not rest on its laurels. The company is testing a smaller format store
known as Villager's Hardware, which competes with small hardware stores. The
company continues to roll out Expo Design Centers and is expanding into
institutional facilities maintenance. Finally, Home Depot is developing an
Internet sales facility that will leverage the company's brand beyond
traditional retail outlets.
International Business Machines Corp. (IBM - $121.375 - NYSE) is a leading
supplier of hardware, software and outsourcing services for the computer
industry. Over 60% of the company's revenues now come from relatively higher
margin software and service businesses. IBM is well positioned as an
6
<PAGE> 7
electronic commerce solutions provider, which also provides a platform to
cross-sell the company's many products. We expect the company to grow earnings
per share going forward.
MediaOne Group Inc. (UMG - $68.3125 - NYSE)is being acquired by AT&T
(T - $43.50 - NYSE) as that company continues to build and enhance its
facilities to offer one stop shopping for telecommunications services. Upon
completion of the merger, AT&T will become the nation's largest provider of
cable television services. Under the leadership of C. Michael Armstrong, AT&T's
growth rate is rising from single digits to double digits. The company wants to
expand beyond being just a long distance provider. They are now a major provider
of wireless telecommunications services (both cellular and personal
communications services ("PCS")) and traditional land-line long distance. The
new AT&T is a major provider of cable television services and Internet access.
Additionally, they will use the cable plant to offer local telephone service.
Mellon Bank Corp. (MEL - $33.75 - NYSE) is one of the largest asset managers in
the country. In addition to the Bank's asset gathering arm, their Dreyfus and
Boston Company subsidiaries continue to grow and prosper. New management is
shedding non-core assets to focus on the company's highest margin and best
growth opportunities. Fees represent over 60% of revenues and that number will
grow with the divestiture of the company's mortgage and credit card operations.
The bank prefers to remain independent but it is an attractive property to
financial services companies seeking to boost their asset manager businesses.
State Street Corp. (STT - $64.625 - NYSE) is a leading provider of financial
services to mutual funds and other institutional investors. The company is the
third largest custodian of assets with $5.3 trillion under custody.
Additionally, State Street is a major asset manager itself with $574 billion
under management. The company is focused on these two business lines and
recently exited the corporate lending business altogether. We believe this
enhances the company's growth prospects and valuation. Management believes the
company has strong growth prospects overseas and growing this part of their
business is a strategic priority, as is having a greater presence directly with
retail investors.
Sun Microsystems Inc. (SUNW - $93.00 - Nasdaq) is a leading provider of hardware
and software for network based distributed computing systems. While most of the
company's revenue is derived from UNIX-based workstations and client servers,
its JAVA operating software is gaining in popularity with software writers. Sun
Microsystems has entered into a joint venture with America Online, which
provides SUNW with a platform to enhance its presence in electronic commerce. As
the top supplier of client server computers to Internet Service Providers, SUNW
is a major beneficiary of continued Internet growth.
Texas Instruments Inc. (TXN - $82.25 - NYSE) is the largest provider of digital
signal processors, a critical component for digital communication devices,
including wireless phones and digital signal lines ("DSLs"). Having restructured
the company in recent years, its valuation is no longer hostage to the dynamic
random access memory ("DRAM") chip cycle and defense businesses. We believe the
digital signal processor ("DSP") chip business, in which TXN is the leader, will
continue to grow rapidly in the foreseeable future.
7
<PAGE> 8
Marsh & McLennan Companies Inc. (MMC - $68.50 - NYSE) is the world's largest
insurance broker and one of the leading asset managers through its ownership of
The Putnam Funds. MMC is also a leader in employee benefit consulting with its
ownership of the Mercer Group. The company's growth rate has accelerated in
recent years due primarily to the success of Putnam. We expect overall growth to
continue based on sustained strong results at Putnam, albeit slower than last
year, and some modest improvement in the company's traditional insurance
brokerage business.
Northern Trust Corp. (NTRS - $83.50 - Nasdaq) is one of an elite group of
institutions with a major presence in the wealth management market for high net
worth individuals and families. The company has established a network of offices
in the primary wealth markets across the country (Palm Beach, Beverly Hills,
etc.) and continues to build its fee income in a methodical way. We believe
earnings will continue to grow, powered by growth in assets under management,
which exceed $200 billion. We regard NTRS as a trophy property within the
banking sector.
Time Warner Inc. (TWX - $60.75 - NYSE) owns one of the finest collections of
media assets in the world. In addition to being the largest operator of cable
television systems, the company is a leading content provider through its
ownership of CNN, Warner Brothers, HBO, Turner Broadcasting, The Cartoon Channel
and other premium and basic cable networks. Time Warner's media empire extends
to music and publishing, where it is a leader in both. The company's business
fundamentals are the best they have been in years with double digit growth in
operating cash flow expected to continue for the foreseeable future.
MINIMUM INITIAL INVESTMENT - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
INTERNET
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains
information about Gabelli Asset Management Inc., the Gabelli Mutual Funds, IRAs,
401(k)s, quarterly
reports, closing prices and other current news. You can send us e-mail at
[email protected].
8
<PAGE> 9
IN CONCLUSION
Last quarter we tipped our hats to the American women that fought their
hearts out and won soccer's Women's World Cup. This quarter we salute 27 year
old Lance Armstrong for having the strength and competitive drive to win the
ultimate honor in bicycle racing, the 2,290 mile long Tour de France. This is
one of the most grueling endurance events of any kind and Lance accomplished
this two years after being told he had cancer. Only one other American has ever
won this event. Nice going Lance.
The Fund's daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's Nasdaq symbol is GABGX. Please call us during the
business day for further information.
Sincerely,
[HOWARD F. WARD SIGNATURE]
HOWARD F. WARD, CFA
Portfolio Manager
October 18, 1999
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TOP TEN HOLDINGS
SEPTEMBER 30, 1999
Texas Instruments Inc. Cisco Systems Inc.
IBM Corp. State Street Corp.
Home Depot Inc. Mellon Bank Corp.
Sun Microsystems Inc. Clear Channel Communications
MediaOne Group Inc. EMC Corp.
- -------------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
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<PAGE> 10
THE GABELLI GROWTH FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS--99.5%
BROADCASTING--5.3%
1,030,600 CBS Corp.+.................................... $ 47,665,250
931,600 Clear Channel Communications Inc.+............ 74,411,550
--------------
122,076,800
--------------
BUSINESS SERVICES--7.6%
1,135,000 Automatic Data Processing Inc. ............... 50,649,375
610,000 Ceridian Corp. ............................... 15,173,750
530,000 First Data Corp. ............................. 23,253,750
1,248,100 Interpublic Group of Companies Inc. .......... 51,328,113
372,000 Omnicom Group Inc. ........................... 29,457,750
145,000 Young & Rubicam Inc. ......................... 6,380,000
--------------
176,242,738
--------------
CABLE--3.6%
1,200,000 MediaOne Group Inc.+.......................... 81,975,000
--------------
COMMUNICATIONS EQUIPMENT--4.1%
1,166,500 Cisco Systems Inc.+........................... 79,978,156
220,000 Lucent Technologies Inc. ..................... 14,272,500
--------------
94,250,656
--------------
COMPUTER HARDWARE--9.0%
570,000 Dell Computer Corp.+.......................... 23,833,125
820,000 International Business Machines Corp. ........ 99,527,500
900,000 Sun Microsystems Inc.+........................ 83,700,000
--------------
207,060,625
--------------
COMPUTER SOFTWARE AND SERVICES--8.8%
870,600 Computer Sciences Corp.+...................... 61,214,062
595,000 Electronic Data Systems Corp. ................ 31,497,813
1,030,000 EMC Corp.+.................................... 73,580,625
205,000 Microsoft Corp.+.............................. 18,565,312
662,000 SunGard Data Systems Inc.+.................... 17,418,875
--------------
202,276,687
--------------
ELECTRONICS--7.5%
910,000 Intel Corp. .................................. 67,624,375
1,282,000 Texas Instruments Inc. ....................... 105,444,500
--------------
173,068,875
--------------
ENTERTAINMENT--3.2%
1,145,000 Time Warner Inc. ............................. 69,558,750
90,000 Viacom Inc., Cl. B+........................... 3,802,500
--------------
73,361,250
--------------
FINANCIAL SERVICES--18.2%
269,375 American International Group Inc. ............ 23,418,789
840,000 Bank of New York Inc. ........................ 28,087,500
994,500 Marsh & McLennan Companies Inc. .............. 68,123,250
2,221,000 Mellon Bank Corp. ............................ 74,958,750
595,000 Merrill Lynch & Co. .......................... 39,976,563
830,000 Northern Trust Corp. ......................... 69,305,000
1,219,400 State Street Corp. ........................... 78,803,725
350,000 SunTrust Banks Inc. .......................... 23,012,500
473,500 T. Rowe Price Associates Inc. ................ 12,991,656
--------------
418,677,733
--------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
HEALTH CARE--13.7%
669,000 Amgen Inc.+................................... $ 54,523,500
610,000 Baxter International Inc. .................... 36,752,500
534,000 Bristol-Myers Squibb Co. ..................... 36,045,000
237,000 Johnson & Johnson ............................ 21,774,375
515,000 Lilly (Eli) & Co. ............................ 32,960,000
521,000 Merck & Co. Inc. ............................. 33,767,312
769,000 Pfizer Inc. .................................. 27,635,938
1,084,000 Warner-Lambert Co. ........................... 71,950,500
--------------
315,409,125
--------------
PUBLISHING--6.8%
680,000 Gannett Co. Inc. ............................. 47,047,500
410,000 Knight-Ridder Inc. ........................... 22,498,750
554,000 McGraw-Hill Companies Inc. ................... 26,799,750
938,000 New York Times Co., Cl. A .................... 35,175,000
510,000 Tribune Co. .................................. 25,372,500
--------------
156,893,500
--------------
RETAIL--8.5%
1,417,718 Home Depot Inc. .............................. 97,290,898
954,000 Lowe's Companies Inc. ........................ 46,507,500
854,200 Tiffany & Co. ................................ 51,198,612
--------------
194,997,010
--------------
TELECOMMUNICATIONS--3.2%
420,000 MCI Worldcom Inc.+............................ 30,187,500
225,000 Qualcomm Inc. ................................ 42,567,188
--------------
72,754,688
--------------
TOTAL COMMON STOCKS........................... 2,289,044,687
--------------
<CAPTION>
PRINCIPAL
AMOUNT
------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS--0.6%
$14,159,000 U.S. Treasury Bills, 4.55% to 4.71% ++,
due 10/07/99 to 11/26/99..................... 14,083,189
--------------
TOTAL INVESTMENTS--100.1%
(Cost $1,635,903,140)........................ 2,303,127,876
OTHER ASSETS AND LIABILITIES (NET)--(0.1)%.... (2,697,508)
--------------
NET ASSETS--100.0%
(56,011,765 shares outstanding).............. $2,300,430,368
==============
$41.07
NET ASSET VALUE, OFFERING AND REDEMPTION ======
PRICE PER SHARE..............................
</TABLE>
- ------------------------------
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
10
<PAGE> 11
GABELLI FAMILY OF FUNDS
GABELLI ASSET FUND
Seeks to invest primarily in a diversified portfolio of common stocks selling at
significant discounts to their private market value. The Fund's primary
objective is growth of capital. (No-load)
Portfolio Manager: Mario J. Gabelli, CFA
GABELLI GROWTH FUND
Seeks to invest primarily in large cap stocks believed to have favorable, yet
undervalued, prospects for earnings growth. The Fund's primary objective is
capital appreciation. (No-load)
Portfolio Manager: Howard F. Ward, CFA
GABELLI WESTWOOD EQUITY FUND
Seeks to invest primarily in the common stock of seasoned companies believed to
have proven records and above average historical earnings growth. The Fund's
primary objective is capital appreciation. (No-load) Portfolio Manager: Susan
M. Byrne
GABELLI SMALL CAP GROWTH FUND
Seeks to invest primarily in common stock of smaller companies (market
capitalizations less than $500 million) believed to have rapid revenue and
earnings growth potential. The Fund's primary objective is capital appreciation.
(No-load)
Portfolio Manager: Mario J. Gabelli, CFA
GABELLI WESTWOOD SMALLCAP EQUITY FUND
Seeks to invest primarily in smaller capitalization equity securities - market
caps of $1 billion or less. The Fund's primary objective is long-term capital
appreciation. (No-load)
Portfolio Manager: Lynda Calkin, CFA
GABELLI WESTWOOD INTERMEDIATE BOND FUND
Seeks to invest in a diversified portfolio of bonds with various maturities. The
Fund's primary objective is total return. (No-load)
Portfolio Manager: Patricia Fraze
GABELLI EQUITY INCOME FUND
Seeks to invest primarily in equity securities with above market average yields.
The Fund pays quarterly dividends and seeks a high level of total return with an
emphasis on income. (No-load)
Portfolio Manager: Mario J. Gabelli, CFA
GABELLI WESTWOOD BALANCED FUND
Seeks to invest in a balanced and diversified portfolio of stocks and bonds. The
Fund's primary objective is both capital appreciation and current income.
(No-load)
Portfolio Managers: Susan M. Byrne & Patricia Fraze
GABELLI WESTWOOD MIGHTY MITES(SM) FUND
Seeks to invest in micro-cap companies that have market capitalizations of $300
million or less. The Fund's primary objective is long-term capital appreciation.
(No-load)
Team Managed: Mario J. Gabelli, CFA, Marc J. Gabelli,
Laura K. Linehan and Walter K. Walsh
GABELLI VALUE FUND
Seeks to invest in securities of companies believed to be undervalued. The
Fund's primary objective is long-term capital appreciation. Max. Sales charge:
5 1/2%
Portfolio Manager: Mario J. Gabelli, CFA
GABELLI ABC FUND
Seeks to invest in securities with attractive opportunities for appreciation or
investment income. The Fund's primary objective is total return in various
market conditions without excessive risk of capital loss. (No-load) Portfolio
Manager: Mario J. Gabelli, CFA
GABELLI U.S. TREASURY MONEY MARKET FUND
Seeks to invest exclusively in short-term U.S. Treasury securities. The Fund's
primary objective is to provide high current income consistent with the
preservation of principal and liquidity. (No-load)
Portfolio Manager: Judith A. Raneri
THE TREASURER'S FUND
Three money market portfolios designed to generate superior returns without
compromising portfolio safety. U.S. Treasury Money Market seeks to invest in
U.S. Treasury bills, notes and bonds. Tax Exempt Money Market seeks to invest in
municipal securities. Domestic Prime Money Market seeks to invest in prime
quality, domestic money market instruments. (No-load)
Portfolio Manager: Judith A. Raneri
An investment in the above Money Market Funds are neither insured nor guaranteed
by the Federal Deposit Insurance Corporation or any government agency. Although
the funds seek to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Funds.
GLOBAL SERIES
GABELLI GLOBAL TELECOMMUNICATIONS FUND
Seeks to invest in telecommunications companies through-out the
world - targeting undervalued companies with strong earnings and cash flow
dynamics. The Fund's primary objective is capital appreciation. (No-load)
Team Manager: Mario J. Gabelli, CFA
GABELLI GLOBAL CONVERTIBLE SECURITIES FUND
Seeks to invest principally in bonds and preferred stocks which are
convertible into common stock of foreign and domestic companies. The Fund's
primary objective is total return through a combination of current income and
capital appreciation.
(No-load) Portfolio Manager: Hart Woodson
GABELLI GLOBAL INTERACTIVE COUCH POTATO(R) FUND
Seeks to invest in securities of companies involved with communications,
creativity and copyright. The Fund also seeks to invest in companies
participating in emerging technological advances in interactive services and
products. The Fund's primary objective is capital appreciation. (No-load)
Portfolio Manager: Marc J. Gabelli
GABELLI GLOBAL OPPORTUNITY FUND
Seeks to invest in common stock of companies which have rapid growth in
revenues and earnings and potential for above average capital appreciation or
are undervalued. The Fund's primary objective is capital appreciation.
(No-load)
Portfolio Managers: Marc J. Gabelli & Caesar Bryan
GABELLI GOLD FUND
Seeks to invest in a global portfolio of equity securities of gold mining and
related companies. The Fund's objective is long-term capital appreciation.
Investment in gold stocks is considered speculative and is affected by a variety
of world-wide economic, financial and political factors. (No-load) Portfolio
Manager: Caesar Bryan
GABELLI INTERNATIONAL GROWTH FUND
Seeks to invest in the equity securities of foreign issuers with long-term
capital appreciation potential. The Fund offers investors global
diversification. (No-load) Portfolio Manager: Caesar Bryan
The six funds above invest in foreign securities which involves risks not
ordinarily associated with investments in domestic issues, including currency
fluctuation, economic and political risks. THE FUNDS LISTED ABOVE ARE
DISTRIBUTED BY GABELLI & COMPANY, INC.
- --------------------------------------------------------------------------------
To receive a prospectus, call 1-800-GABELLI (422-3554). The prospectus gives a
more complete description of the Fund, including fees and expenses. Read the
prospectus carefully before you invest or send money.
1-800-GABELLI
(1-800-422-3554) -- fax: 1-914-921-5118 -- www.gabelli.com -- [email protected]
One Corporate Center, Rye, New York 10580
<PAGE> 12
THE GABELLI GROWTH FUND
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
FAX: 1-914-921-5118
HTTP://WWW.GABELLI.COM
E-MAIL: [email protected]
(Net Asset Value may be obtained daily
by calling
1-800-GABELLI after 6:00 P.M.)
<TABLE>
<S> <C>
BOARD OF TRUSTEES
Mario J. Gabelli, CFA Karl Otto Pohl
Chairman and Chief Former President
Investment Officer Deutsche Bundesbank
Gabelli Asset Management
Inc.
Felix J. Christiana Anthony R. Pustorino
Former Senior Vice President Certified Public Accountant
Dollar Dry Dock Savings Bank Professor, Pace University
Anthony J. Colavita Anthony Torna
Attorney-at-Law Herzog, Heine & Geduld, Inc.
Anthony J. Colavita, P.C.
James P. Conn Anthonie C. van Ekris
Former Chief Investment Managing Director
Officer BALMAC International, Inc.
Financial Security Assurance
Holdings Ltd.
John D. Gabelli
Senior Vice President
Gabelli & Company, Inc.
OFFICERS AND PORTFOLIO MANAGERS
Bruce N. Alpert Howard F. Ward, CFA
President and Treasurer Portfolio Manager
James E. McKee
Secretary
</TABLE>
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND
AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom
LLP
- ---------------------------------------
This report is submitted for the
general information of the shareholders
of The Gabelli Growth Fund. It is not
authorized for distribution to
prospective investors unless preceded
or accompanied by an effective
prospectus.
- ---------------------------------------
GAB406Q399SR
THE
GABELLI
GROWTH
FUND
THIRD QUARTER REPORT
SEPTEMBER 30, 1999
[PHOTO]
